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The Attorney General of Texas 

August 16, 1979 

MARK WHITE 

Attorney General 

Honorable George Cowden 

Chairman 

Public Utility Commission 

of Texas 

7800 Shoal Creek Boulevard 

Austin, Texas 78757 

Opinion No. MW-45 

Re: Whether a cooperative effort 

of various industries to jointly 

operate an entity cogenerating 

electricity causes the entity to be 

a public utility. 

Dear Chairman Cowden: 

You have requested our opinion concerning the classification of 

cogeneration projects under the Public Utility Regulatory Act, article 1446c, 

V.T.C.S. 

Your question primarily involves section 3(c) of the Act which provides 

in pertinent part: 

(c) The term ‘public utility’ or ‘utility,’ when used 

in this Act, includes any person, corporation, river 

authority, cooperative corporation, or any combination thereof, other than a municipal corporation, or 

their lessees, trustees, and receivers, now or 

hereafter owning or operating for compensation in 

this state equipment or facilities for: 

(1) producing, generating, transmitting, 

distributing, selling, or furnishing electricity 

(‘electric utilities’ hereinafter); . . . . 

. . . . 

(4) . . . The term ‘public utility’ or ‘utility’ shall 

not include any person or corporation not otherwise a 

public utility that furnishes the services or 

commodity described in any paragraph of this 

subsection only to itself, its employees, or tenants as 

an incident of such employee service or tenancy, 

when such service or commodity is not resold to or 

used by others. 

p. 134 
Honorable George Cowden - Page Two @W-4 5 ) 

Your question involves the status of certain industrial concerns which can cogenerate 

electricity as a by-product of their normal industrial processes. The cogeneration project 

is proposed to be conducted by a Texas general partnership composed of four nonregulated corporations. 

The project will replace existing conventional oil/gas boilers at plants individually 

owned by each partner with a single coal or lignite fired cogeneration steam plant. The 

plant will burn coal or lignite to convert water to high pressure steam. The high pressure 

steam will pass through turbines to produce 180 megawatts of electricity. The 

cogeneration plant will consume approximately sixty megawatts, leaving 120 megawatts 

available for export. The high pressure steam after passing through the turbine will 

automatically drop to a lower pressure steam which will be delivered to the corporate 

partner’s plants for use as process steam. The partners will consume the entire output of 

the partnership. 

You ask if the partnership or the partners will be a public utility as defined in the 

Act. As defined in section 3(c) of the Act, a corporate partnership is the type of entity 

which would be a public utility if it owned or operated for compensation facilities 

described in section 3(c)(l) as being for the production, generation, transmission, 

distribution, sale or furnishing of electricity. The partnership is clearly an entity which 

will own facilities used for the generation of electricity for compensation, and without an 

exemption, would be a public utility under the Act. 

The legislature recognized when it passed the Act that it did not intend to regulate 

entities which were furnishing utility service to themselves. The public interest in 

regulating utilities as &fined in the Act is expressed in section 2 of the Act. 

Sec. 2. This Act is enacted to protect the public interest 

inherent in the rates and services. of public utilities. The 

legislature finds that public utilities are by definition monopolies in 

the areas they serve; that therefore the normal forces of 

competition which operate to regulate prices in a free enterprise 

society do not operate; and that therefore utility rates, operations 

and services are regulated by public agencies, with the objective 

that such regulation shall operate as a substitute for such 

competition. The purpose of this Act is to establish a 

comprehensive regulatory system which is adequate to the task of 

regulating public utilities as defined by this Act, to assure rates, 

operations, and services which are just and reasonable to the 

consumers and to the utilities. 

The legislature in section 3(c)(4) exempted from regulation an entity which furnished 

utility service solely to itself. It is clear from the language of section 3(c)(4) that if each 

corporation built its own individual cogeneration facility, each one would meet the 

exception and would not be a public utility under the Act. 

P. 135 
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Honorable George Cowden - Page Three (NW-451 

We recognize that Texas has favored the entity rather than the aggregate theory in 

the Texas Uniform Partnership Act, article 6132b, V.T.C.S. See Source and Comments, 

Alan R. Bromberg, following section 1 of article 6132b. Thecomments, however, also 

emphasize that the entity theory has been used when it accords with business usage. 

The decision as to whether a cogeneration project conducted by a Texas general 

partnership would be a public utility is a new regulatory issue. It is not the type of 

business decision referred to in the comments to the Texas Uniform Partnership Act which 

caused entity treatment of many partnership transactions. In addition, the Texas Uniform 

Partnership Act still accords aggregate treatment to some partnership transactions. For 

example, section 15 of the Texas Uniform Partnership Act makes all partners liable jointly 

and severally for all debts and obligations of the partnership. We, therefore, conclude that 

the aggregate theory should be followed in determining whether the partnership is 

supplying electricity to itself within the meaning of section 3(c)(4) when it supplies 

electricity to the plants owned by the partners. It is our opinion that the legislature 

intended to exempt a partnership in which the commodity is consumed entirely by the 

partnership and its corporate partners. To hold otherwise would ignore legislative intent 

and elevate form over the substance of the transaction. 

SUMMARY 

A cogeneration facility owned by a partnership which furnishes 

electricity solely to the corporate partners is not a public utility 

under the Public Utility Regulatory Act. 

MARK WHITE 

Attorney General of Texas 

JOHN W. FAINTER, JR. 

First Assistant Attorney General 

TED L. HARTLEY 

Executive Assistant Attorney General 

Prepared by Joyce Beasley 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

C. Robert Heath, Chairman 

Joyce Beasley 

P. 136 
Honorable George Cowden - Page Four (Mw-45) 

David B. Brooks 

Rick Gilpin 

William G Reid 

p. 137